Income Tax Slab Rates for FY 2025-26

If you are planning your finances, then it is time to understand how much tax you actually need to pay. Income tax slab rates change every year, and these changes can impact your salary, savings, and investments. Whether you are filing under the old regime or the new, knowing the latest slab rates helps you make smarter money decisions. In this blog, you will get a complete guide on income tax slab rates for FY 2025-26.

What are Income Tax Slabs?

Income tax slabs are the different income ranges used by the government to decide how much tax a person needs to pay. These slabs are designed to ensure fair taxation, people who earn more are taxed more, and those who earn less are taxed less. In India, these slabs are divided based on income levels and may vary depending on your age and whether you choose the old or new tax regime. Each slab has a different tax rate, which increases with higher income. This system helps promote balanced taxation and gives everyone a chance to plan their finances wisely. Staying updated with the latest slabs is important to avoid overpaying and to claim the right deductions.

Difference Between Old and New Tax Regimes

The Government of India offers taxpayers two options to file their income tax returns: The Old Tax Regime and the New Tax Regime. The difference between the two lies mainly in tax rates and available deductions/exemptions.

Old Tax Regime

The old regime is beneficial for those who claim various deductions and exemptions. It allows taxpayers to reduce their taxable income by using benefits such as:

• Section 80C: Investments in PPF, ELSS, LIC premiums, etc. (up to Rs. 1.5 lakh)
• Section 80D: Medical insurance premium
• House Rent Allowance (HRA)
• Standard deduction of Rs. 50,000 (for salaried individuals)
• Leave Travel Allowance (LTA) and many more.

This regime is best suited for individuals who have made smart investments and want to claim tax-saving benefits.

New Tax Regime

Introduced in FY 2020-21, the new tax regime offers lower tax rates but removes most exemptions and deductions. It has simplified the process, especially for those who do not invest heavily in tax-saving instruments.

• No deduction under 80C, 80D, or HRA
• Standard deduction is now allowed (as per Budget 2023)
• Lower tax rates for each income slab

This regime is ideal for those who prefer ease of filing and have minimal tax-saving investments.

New Tax Regime Income Tax Slab Rates for FY 2025-26 (Salaried Employees)

The following details include the tax slabs under the new regime, applicable from April 1, 2025 for salaried individuals:

As per the revised income tax rules for the financial year 2025–26, the new tax regime offers a major benefit for salaried individuals. The standard deduction has been increased to Rs. 75,000, and under Section 87A, individuals can claim a rebate of up to Rs. 60,000 if their total tax payable is Rs. 60,000 or less. This means that if your annual salary is Rs. 12 lakh, you may not have to pay any income tax at all, even without claiming any other deductions.

Here is how it works:

From your Rs. 12 lakh salary, Rs. 75,000 is deducted as the standard deduction, which brings your taxable income down to Rs. 11,25,000. Then, using the new tax slab rates, you pay Rs. 20,000 (5% on Rs. 4L– Rs. 8L) and Rs. 32,500 (10% on Rs. 8L– Rs. 11.25L), totaling Rs. 52,500 in tax. Since this is below the Rs. 60,000 rebate limit, your net tax becomes zero. This update makes the new regime especially attractive for middle-class salaried employees, simplifying tax filing and saving money without needing extra exemptions or investments.

Key Features of the New Tax Regime (FY 2025–26)

The following details include the key features of the new tax regime FY 2025-26)

• Higher Tax-Free Income Threshold

Individuals with taxable income up to Rs. 12 lakh are eligible for a full rebate under Section 87A, resulting in zero tax liability. This raises the limit from Rs. 7 lakh, giving better tax relief and more savings for middle-income individuals and families.

• Increased Standard Deduction

Salaried people and pensioners can now enjoy a higher standard deduction of Rs. 75,000, increased from the earlier Rs. 50,000. This effectively raises the tax-free income threshold to Rs. 12.75 lakh for these taxpayers.

• Default Tax Regime

Starting from FY 2025–26, the new tax regime is the default option for all taxpayers. However, individuals can choose to opt for the old tax regime if it better suits their financial situation.

• Limited Exemptions and Deductions

The new regime simplifies tax filing by removing most exemptions and deductions, such as those under Sections 80C and 80D. The primary deductions available are the standard deduction and employer contributions to the NPS Tier-I account.

• Enhanced NPS Contribution Deduction

Employer contributions to the National Pension System (NPS) Tier-I account are now deductible up to 14% of the basic salary, up from the previous 10%. This change encourages

Tax Regime Income Tax Slab Rates for FY 2024-25

If you are filing your income tax return for FY 2024-25, it covers income from 1 April 2024 to 31 March 2025. File by 15 Sept (non-audit) or 31 Oct (audit).

New Tax Regime for Businesspersons (Non-Auditable) for FY 2025-26

The New Tax Regime for Business persons (Non-Audit Cases) for FY 2025-26 offers a simplified and beneficial tax structure for small business owners, Hindu Undivided Families (HUFs), and firms (excluding LLPs) with turnover below Rs. 1 crore (businesses) or Rs. 50 lakh (professionals) who do not require an audit under Section 44AB. This regime features lower tax rates in a clear slab system and removes most exemptions like 80C, HRA, and standard deductions (except for salaried/pensioned individuals).

A tax rebate under Section 87A ensures no tax up to Rs. 7 lakh income. The Presumptive Tax Scheme allows businesses under Section 44AD to declare 8% of turnover (6% for digital payments) without audit, and professionals under Section 44ADA to declare 50% of gross receipts similarly, simplifying compliance and encouraging digital transactions. Opting in requires filing Form 10-IEA, and switching back is limited, offering stability and ease for non-audit taxpayers.

Tax Slabs for Non-Audit Businesspersons (FY 2025-26)

Presumptive Tax Scheme Details:

Section 44AD (Businesses): Declare 8% of turnover as income (6% if at least 95% of receipts are digital). Applicable up to Rs. 3 crore turnover, no audit required.

Section 44ADA (Professionals): Declare 50% of gross receipts as income, applicable up to Rs. 75 lakh gross receipts (95% digital receipts required). No audit needed.

New Tax Regime for Businesspersons (Auditable) for FY 2025-26

Both Salaried and Businesspersons follow the same new tax slabs for FY 2025-26.

Salaried Employees get a standard deduction of Rs 75,000 automatically. This reduces their taxable income directly. Business persons do not get this standard deduction. Instead, they can claim business expenses and allowable deductions under the Income Tax Act related to their profession or business. For salaried individuals, the new tax regime is optional. They can choose the old tax regime with more deductions like Section 80C up to Rs. 1.5 lakh for investments, House Rent Allowance (HRA), Leave Travel Allowance (LTA), and more.

For businesspersons with auditable income, the new tax regime is mandatory if their turnover exceeds Rs. 10 crore or as specified under audit rules, unless they opt out by filing Form 10-IEA before the tax return due date.

Under the new tax regime, these deductions are mostly removed. Businesspersons typically have different types of expenses, such as rent, salaries paid, raw materials, and depreciation, which they can claim as business expenses against income. These are allowable under both regimes but need proper documentation and an audit.

Both salaried and businesspersons (individuals and HUF) with taxable income up to Rs. 7 lakh are eligible for the full rebate, effectively making tax zero up to this limit.

Taxpayer Categories in India

In India, income tax rates vary based on the taxpayer's category. Here are the income tax slab rates for Financial Year (FY) 2025–26 (Assessment Year 2026–27):

1. Individual Taxpayers (Below 60 Years)

Old Tax Regime:

New Tax Regime:

2. Senior Citizens (60–79 Years)

Old Tax Regime:

New Tax Regime: Same as individual taxpayers below 60 years.

3. Super Senior Citizens (80 Years and Above)

Old Tax Regime:

New Tax Regime: Same as individual taxpayers below 60 years.

1. Hindu Undivided Families (HUFs): Taxed similarly to individual taxpayers under both regimes.
2. Firms and Limited Liability Partnerships (LLPs): Taxed at a flat rate of 30% under both regimes. Surcharge and cess apply as per income levels.
3. Companies:

• Domestic Companies: Base tax rate is 30%, reduced rate of 22% (plus surcharge and cess) for companies not availing exemptions/deductions, as per Section 115BAA. For new manufacturing companies, the tax is 15% (plus surcharge and cess) under Section 115BAB.
• Foreign Companies: Taxed at 40% (plus applicable surcharge and cess).

4. Non-Resident Indians (NRIs)

NRIs need to pay tax only on the income they earn or receive directly in India, not on foreign earnings. Tax rates are the same as for resident individuals, without the benefit of the basic exemption limit in certain cases.

Role of Income Tax Slabs in Financial Planning

Knowing which tax slab you fall under can help you save money, invest wisely, and reach your financial goals faster. Let us discuss the role of tax slabs in financial planning:

Helps You Estimate Your Tax Outgo

By knowing your tax slab, you can easily calculate how much tax you will need to pay in a year. This helps in better monthly budgeting and avoiding last-minute surprises at the time of filing returns. Use the Income Tax Department’s calculator to check your estimated tax liability.

Guides Investment Planning

Certain investments (like PPF, ELSS, NPS) offer deductions under the old tax regime. If you fall into a higher slab, these investments reduce your taxable income and help build long-term wealth. Choose the old regime if you can claim many deductions; the new regime suits those with fewer exemptions.

Boosts Retirement Planning

Planning based on your slab helps you invest in retirement plans that save tax today (like NPS, SCSS). It also ensures regular post-retirement income with tax-efficient planning.

Supports Insurance & Loan Planning

Premiums on life and health insurance, or interest on education/home loans, can be claimed under Sections 80C, 80D, and 80E in the old regime. This lowers your tax and encourages Financial safety and responsible borrowing.

Helps You Choose the Right Tax Regime

As of FY 2025–26:

• The New Tax Regime is the default, with lower slab rates but no deductions.
• The Old Regime offers tax benefits but has higher rates.
• Knowing your slab under both options helps you decide which regime saves you more.

Improves Long-Term Wealth Planning

Once you know your slab and savings potential, you can set financial goals like buying a house, higher education, etc. Align savings, insurance, and investments accordingly

Policy Objectives Behind Changing Slabs

The Indian government's adjustments to income tax slabs in the 2025 Union Budget are strategic moves aimed at achieving multiple policy objectives. The following details include the policy objectives behind changing slabs:

• Stimulating Middle-Class Consumption: By increasing the tax-free income threshold to Rs. 12 lakh under the new tax regime, the government aims to boost disposable income for middle-income earners. This measure is expected to enhance consumer spending, thereby stimulating economic growth.
• Simplifying the Tax Structure: The introduction of the new tax regime with fewer exemptions and deductions simplifies the tax filing process. This streamlined approach reduces compliance burdens and makes the tax system more user-friendly.
• Encouraging Investment and Savings: With increased disposable income resulting from tax relief, individuals are more likely to invest and save. This can lead to greater financial inclusion and support long-term economic stability.
• Enhancing Transparency and Reducing Tax Evasion: Simplifying tax laws and reducing the number of exemptions can lead to greater transparency in the tax system. A more straightforward tax structure makes it easier to detect and deter tax evasion.
• Aligning with Global Best Practices: The move towards a simplified and transparent tax regime aligns India's tax system with global standards. This alignment can enhance investor confidence and make India a more attractive destination for foreign investment.
• Promoting Voluntary Compliance: A simplified tax regime with lower rates and fewer exemptions encourages voluntary compliance among taxpayers. When taxpayers find the system fair and easy to navigate, they are more likely to comply willingly.

Common Misconceptions About Tax Slabs

When it comes to income tax, many people in India get confused, especially around tax slabs. These misunderstandings can lead to wrong financial decisions or unnecessary stress. Here are some common misconceptions about tax slabs:

1. “If I enter a higher tax slab, all my income gets taxed at that higher rate.”

Reality:

• This is one of the biggest myths. India follows a progressive tax system. This means:
• Only the income that falls within a higher slab is taxed at that slab’s rate.
• The rest is taxed at lower rates based on the applicable slab ranges.

For example, if you earn Rs. 8 lakh in a year under the old regime:

• The first Rs. 2.5 lakh is tax-free.
• The next Rs. 2.5 lakh is taxed at 5%.
• The next Rs. 2.5 lakh is taxed at 10%.
• Only the remaining Rs. 50,000 is taxed at 15%.

2. “The new regime is always better because it has lower tax rates.”

Reality:

Not always! While the new regime has lower tax rates, it doesn’t allow popular deductions like those under Section 80C, 80D, HRA, etc. If you claim many deductions and exemptions, the old regime might save you more tax. Use the tax comparison calculator on incometax.gov.in to check what works best for you.

3. “Senior citizens have to pay the same taxes as everyone else.”

Reality:

Senior citizens (60–79 years) and super senior citizens (80+) have higher basic exemption limits under the old regime:

• Rs. 3 lakh for senior citizens
• Rs. 5 lakh for super senior citizens

4. “Filing income tax returns is optional if I fall under the exemption limit.”

Reality:

Even if you earn less than the exemption limit, you may still need to file an ITR to:

• Claim TDS refunds
• Carry forward capital losses
• Apply for loans or visas

Understanding income tax slab rates isn’t just about tax, it is about smarter financial planning. As tax policies evolve, staying updated helps you save more, invest better, and make informed decisions. Whether you choose the old or new regime, knowing where you stand empowers you to make every rupee count. This article provided you with detailed information on income tax slab rates for FY 2025-26. Contact Online Legal India to get assistance and support in filing income tax returns from professional experts.